The case of 31-year-old Wu Ying, who was convicted of “illegal fund-raising”, has also stirred debate about the fairness of the economic system. State-owned enterprises can borrow money from (state-owned) banks, whereas private businesses are often left to fend for themselves in an informal market of moneylending, such as the one in which Ms Wu thrived.

Ms Wu’s youth and humble origins, as well as an absence of real evidence that her activities caused harm to anyone, except possibly some rich investors, have also helped endear her to a general public informed by internet chatter. She began her career working in her aunt’s beauty salon in coastal Zhejiang province, and went on to run other beauty parlours before building up a conglomerate, the Bense Group, with a wide range of interests from property to lending. Amazingly, in 2006, aged just 25, she was named China’s sixth-richest woman by Hurun Report, a wealth researcher.

Ms Wu’s extraordinary rise is hard to imagine without her doing some dodgy deals. Possibly the wrong ones, for her fall was even more rapid than her rise. She was arrested, sentenced to death in 2009 for illegally raising $120m in funds from illicit sources (ie, not official banks). Chinese press reports said Ms Wu gave information that led to the arrests of officials and bankers. Some wonder whether the death sentence was aimed at stopping her from revealing more.

Her crime involved a common, illegal practice in China: raising money from the public with promises to pay back high interest rates. Known as shadow banking, these underground lending and investing networks are estimated to total $1.3 trillion, according to Ren Xianfang, an economist with IHS Global Insight Ltd. (IHS) in Beijing. That’s the size of the 2011 U.S. government deficit.

Operating outside the banking system or government regulation, the informal networks provide an important source of economic growth, capital for private companies and return for investors seeking to beat inflation. Premier Wen Jiabao, in an unusual move, weighed in on the Wu case at a March 14 news conference. His comments highlighted a public debate over the importance of shadow banking to the Chinese economy, government efforts to bring it under control — and whether capital punishment is an effective means to do so.

[…]“Entrepreneurs are paying attention to it because today’s Wu Ying could be any of them tomorrow,” the lawyer, Yang Zhaodong, said in an interview in Beijing last month. “There are so many of them doing the same thing Wu Ying did. This case not only relates to Wu’s life, but to whether China’s legal and judicial system is fair.”

Shadow banking has been fueled by a two-year credit squeeze in China and by large, state-owned banks’ preference for lending to government-run companies rather than small businesses. Private entrepreneurs account for 60 percent of China’s total economic activity and provide jobs for 80 percent of its urban population, according to China’s National Development and Reform Commission.

Her case has become emblematic of the difficulties of being an entrepreneur under China’s system of state capitalism, and of the murky world in which much private enterprise is conducted, with businesses forced to take risks to get ahead.

[…]”Wu’s death penalty is a setback for the cause of reform in China,” the influential economist Zhang Weiying said. “Judging from this case, how far are we from the market economy? At least 300 years.”

[…]Supporters claim Wu was singled out because “she annoyed someone” and lacked connections. Some think she upset influential creditors or rivals; some that she refused to pay bribes. Her case is not about enforcing the law, they argue, but about the law being enforced selectively – and excessively – when the interests of money and power coincide.

Many see such links between wealth and power, on a grander scale, as the biggest obstacle to reforms. Others think the risks of instability posed by restructuring finance, state enterprise and the labour market are simply too threatening for leaders.